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  • Revision Exercises

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    Fahed Madi
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    The standard deviation of returns on Stock X is 0.24 based on the probability distribution and returns provided in the bear, normal and bull markets. The expected return of a portfolio investing $1,200,000 in Stock A and $800,000 in Stock B can be calculated based on the probability of each economic state and the corresponding returns for each stock.

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    The standard deviation of returns on Stock X is 0.24 based on the probability distribution and returns provided in the bear, normal and bull markets. The expected return of a portfolio investing $1,200,000 in Stock A and $800,000 in Stock B can be calculated based on the probability of each economic state and the corresponding returns for each stock.

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    © All Rights Reserved
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    8 views1 page

    Revision Exercises

    Uploaded by

    Fahed Madi
    The standard deviation of returns on Stock X is 0.24 based on the probability distribution and returns provided in the bear, normal and bull markets. The expected return of a portfolio investing $1,200,000 in Stock A and $800,000 in Stock B can be calculated based on the probability of each economic state and the corresponding returns for each stock.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    Question 1: Consider the following probability distribution of returns for

    Stock X.
    Bear Market Normal Market Bull Market
    Probability 0.2 0.5 0.3
    Stock X Return -0.20 0.18 0.50

    What is the standard deviation of returns on Stock X?

    Question 2: The Probability Distribution Of Returns For Stocks A And B Are


    Given In The Table Below. If You Invest $1,200,000 In Stock A And
    $800,000 In Stock B, Calculate The Expected Return Of Your Portfolio.

    State of Economy Probability of state Stock A's Return Stock B's Return
    Boom 0.20 40% 28%
    Normal 0.40 25% 12%
    Slow Down 0.30 0% 7%
    Recession 0.10 -20% 0%

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